Ever feel like you’re drowning in debt? Many people have.
And, if your debt has become unmanageable, declaring bankruptcy may be your only option. But it’s not a miracle cure.
Frankly, it can be a long and difficult process. And it will have a long-lasting impact on your financial life.
Still, it’s possible to recover from it (and even end up better than where you started). Here are three ways to get back on track financially after declaring bankruptcy:
1) Check your credit report regularly
You can request one free credit report from each of the three credit reporting bureaus every four months here.
You should already be checking your report at least annually.
After a bankruptcy, it’s even more important to review it to make sure your score steadily improves.
Credit reporting agencies can make mistakes. An error on your report may further damage your credit … and that’s the last thing you need as you recover from bankruptcy.
2) Rebuild your credit
Filing for bankruptcy basically tells the world that you weren’t able to fulfill your financial obligations.
As a result, you must earn back the trust of lenders over time. Here are two ideas:
Pay your bills on time. Payment history accounts for 35% of your credit score. After a bankruptcy, timely payments are even more important.
Having trouble remembering bill due dates? Set up an auto-draft with your bank and never miss a payment again!
Use a secured credit card. You put a deposit down on the total credit line on the secured card up front. If you deposit $250, then $250 will be your credit limit.
Rebuild your credit by using the card to buy at least one item each month. Then pay it off in full each month. Doing this over time will help prove your trustworthiness to lenders.
3) Budget ruthlessly
A budget is critical in re-establishing yourself financially. It shows you where every dollar you spend goes.
If you pay attention, it may even help you see if you start repeating spending patterns that caused the bankruptcy.
But a budget only works if you’re disciplined and consistent. If you blow it every month, you’ll eventually find yourself in financial shambles again.
Be honest with yourself. Create a budget that you can live with, but make sure it also lets you meet your financial obligations. Then stick to it.
Bankruptcies are tough. But, given enough time and discipline, you WILL get back on track.
Don’t be embarrassed if you had to declare bankruptcy. Instead, let it motivate you to get in the best financial shape possible.
Have you, or someone you know, recovered from bankruptcy? Send us a reply and share what recovery strategies worked for you.